Abstract

Upper-echelons theory has been an extremely active stream of research for over two-decades and, as a counterbalance to the population ecology perspective, has provided evidence to support the position that managers influence firm outcomes. Upper-echelons theory posits that, as managers are boundedly rational and selectively perceptive, a behavioural component derived from their idiosyncratic characteristics should be evident in organisation outcomes. While extensive research has found support for these posited relationships, the operationalisation process subsumes the presumed micro psychological processes into a black-box. Adopting a realist perspective, this thesis goes beyond accepting that organisational outcomes are shaped by managers characteristics and explores the underlying generative mechanisms at work. While upper-echelons theory presumes that a process of selective perception explains the black-box processes, in the two-decades since its publication it has received little empirical attention. In this light, the selective perception literature is extensively reviewed, ultimately rejected, and an alternative model developed. Over time, both strategic choice and population ecology theorists have moved from their extreme positions of opposition and a theory of managerial discretion has been proposed to bridge the divide. This thesis builds and extends the concept of managerial discretion as an alternative framework to explain the black-box processes of upper-echelons theory. The theoretical model developed, proposes how, through the process of perceived, enacted, and actual discretion, managers characteristics shape outcomes. The model provides an extensive base for future research and this thesis tests the initial stage, exploring the relationship between managerial characteristics and perceived discretion.